Israel borrowed $8 billion during the war

Israel announced that it had borrowed approximately 30 billion shekels ($7.8 billion) since October 7, when it launched attacks on the blockaded Gaza Strip.

According to figures announced by the Israeli Ministry of Finance, approximately $8 billion has been borrowed since October 7, more than half of which is NIS 16 billion in dollars and issues on international markets.

The Ministry of Finance acquired another 3.7 billion shekels (approximately $1 billion) on the local market at the weekly bond auction held yesterday.

The ministry’s general accounting department stated that the borrowing allowed Israel’s financial possibilities to fully and optimally finance all the government’s needs.

In Israel, the budget deficit, recorded at NIS 4.6 billion in September, rose to NIS 22.9 billion in October, due to both skyrocketing public spending and a slowing economy. This situation increased the budget deficit in the last 12 months to 2.6 percent.

THE COST OF WAR IS INCREASING IN THE ISRAELI ECONOMY

Israel entered a period of intense spending after entering a state of war on October 7. Prime Minister Benjamin Netanyahu announced that he had “ordered the taps to be turned on.”

In contrast, Bank of Israel Governor Amir Yaron emphasized the need for a balanced approach between supporting the economy and maintaining a strong financial position.

The Israeli budget was burdened with many expenses, such as the expenses of the army that constantly attacked Gaza, tax exemption for approximately 350,000 reserve soldiers, additional financial support, tax deductions and accommodation for evacuees from conflict zones. The withdrawal of reservists from the workforce and active consumption also weakened production and economic mobility.

The Israeli business newspaper “Calcalist” wrote that the total cost of the war will exceed approximately 51 billion dollars.

POSITIVE IMAGE IN ECONOMIC INDICATORS

The shekel, which entered a downward trend against the dollar, fell to its lowest level in the last 10 years.

Israel’s foreign exchange reserves declined as the Bank of Israel attempted to protect the country’s currency.

According to the Central Bank, reserves decreased by $7.3 billion to $191.2 billion.

Additionally, it was reported that Israel’s tax revenues also decreased due to the slowdown in the economy.

While international credit rating agency Standard & Poor’s (S&P) confirmed Israel’s credit rating as “AA-” on October 25, it changed the rating outlook from “stable” to “negative” due to geopolitical risks.

Fitch Ratings announced early last week that it had placed Israel’s “A+” credit rating on negative watch due to geopolitical risks.

Moody’s announced on October 20 that it was reviewing Israel’s “A1” credit rating for a possible downgrade.

It was estimated that Israel’s additional spending and the slowdown in the economy would lead to an increase in the 2023 budget deficit. (BRITISH AUTOMOBILE CLUB)